Downstream research joint venture with upstream market power
University of the Thai Chamber of Commerce. Research Support Office
In a vertically related industry, we examine the downstream firms' incentives to invest in costreducing Research and Development (R&), and to form a Research Joint Venture (RJV), under two alternative structures of input supply: exclusive vertical relations and a single supplier. In contrast to the "holdup" argument, in which downstream firms invest noncooperatively and spillovers are low, R& investments are higher under a single supplier than under competing vertical chains.Downstream firms' incentives to form a RJV are also stronger in the former case than they are in the latter. We identify conditions under which an RJV is beneficial for society. Integrated innovation and competition policies are also discussed.
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University of the Thai Chamber of Commerce
C. Manasakis, E. Petrakis, Vasileios Zikos (2014) Downstream research joint venture with upstream market power. Southern Economic Journal Vol.80 No.3, 782-802.